vs. ) CASE NO. 89-2730
Respondent. )
This matter was heard by William R. Dorsey, Jr., the Hearing Officer designated by the Division of Administrative Hearings, on March 1, 1990, in Tallahassee, Florida.
For Petitioner: Robert v. Elias, Esquire
For Respondent: Steven M. Malono, Esquire
Edward, W. Dougherty, Jr., Esquire Mang, Rett & Collette, P.A.
660 E. Jefferson Street Tallahassee, Florida 32302
The issue is whether Mr. Lowe should be disciplined for fraudulent conduct as a licensed insurance agent by making false representations on insurance applications, by fraudulently signing the names of spouses on insurance applications, and by fraudulently signing the names of insureds on cancellation forms.
The Department had filed a five count complaint against Mr. Lowe on April 27, 1989 which alleged that, as a representative of Colonial Life and Accident Insurance Company, he made material misrepresentations on applications for insurance submitted on behalf of state employees or their spouses, that Mr. Lowe forged signatures on these applications, and that he forged signatures on requests for cancellation of policies which were issued.
The Department moved to amend the complaint on November 21, 1989 to add eight additional counts, and the motion was granted. On February 16 Mr. Lowe filed some 51 admissions which narrowed the issues at the final hearing. The hearing began on March 1, 1990.
The Department called three witnesses at the hearing, J. Frank Manning, Bill Hopkins, and Eva Lynn Hill. The Department also offered 22 exhibits. Twenty-one were admitted, but a ruling on the admissibility of excerpts of the deposition given by Mr. Lowe in a separate action was deferred.
Mr. Lowe offered the testimony of one witness, Thomas Cook; he offered no exhibits.
Lawrence Sherman Lowe, III is licensed and eligible for licensure as a life (2-16), life and health (2-18), and health (2-40) insurance agent.
At the times pertinent to the allegations of the administrative complaint, Mr. Lowe was licensed as a life and health insurance agent for Colonial Life and Accident Insurance Company (Colonial).
Colonial offers insurance to state employees as part of group insurance plans and also offers individual policies of insurance. Some insurance programs are available to spouses of state employees, and have benefits similar to those in the group plans, but they have a higher premium and may have different underwriting criteria.
Bill Hopkins is marketing director for Colonial, and has held that position since 1977. Before that, he was an agent with the company. Mr. Hopkins' responsibilities include recruiting, training, and working with various sales directors for the company. Although Mr. Hopkins is a licensed insurance agent, he does not actively solicit insurance business now, but oversees the marketing of Colonial's insurance products to employees of
24 agencies of the State of Florida.
Mr. Hopkins was generally responsible for hiring Mr. Lowe. Mr. Lowe's initial sales territory was Florida from Fort Pierce to Key West. Colonial makes available correspondence courses for agents concerning underwriting and other aspects of the insurance business pertinent to products offered by Colonial; its agents also receive on the job training. In 1987 colonial began to offer quarterly workshops to its agents and sales directors, which Mr. Lowe attended. In the course of soliciting insurance contracts, agents often complete the top form of the application for the potential insured. Mr. Lowe knew that information about a potential insured was to be taken in the presence of the applicant, and that the applicant had to sign the policy application, attesting to the correctness of the information contained therein.
Insurance companies cannot offer to state employees whatever insurance products they wish. The insurance products must be approved by each state agency before employees may be solicited by Colonial's agents to purchase approved products. Colonial's agents are compensated by commissions on policies they sell, and they receive renewal commissions as long as the agent remains under contract with Colonial and the policies they sold remain in force. The supervisors of agents, such as Mr. Hopkins, receive compensation in the form of override commissions based on the productivity of the agents supervised. Those override commissions are the sole source of Mr. Hopkins' compensation.
J. Frank Manning, Jr. is Assistant General Counsel for Colonial, and is responsible for managing litigation and advising several departments within the company.
Mr. Manning came to know about Mr. Lowe shortly after joining the company, when Mr. Lowe received a Hall of Fame Award from the company for being the nation's top producer of business for that year.
Under his contract with Colonial, Mr. Lowe marketed plans of group health, life and disability insurance to employees of the State of Florida. The Department of Health and Rehabilitative Services did not approve sickness riders as insurance products which agents of Colonial were entitled to solicit from employees of that department.
Spouses and dependents of state employees may be insured for accident and disability through a rider attached to the policy of the primary insured,
i.e. the state employee. If a state employee obtains coverage for a spouse through a rider attached to a policy issued to an employee, premiums for the rider may be paid through payroll deduction from the salary warrant of the employee, or through a bank authorization to deduct the premium for the rider directly from the checking account of the employee.
The processing of the applications is completed by the agent, and is summarized on various sheets which are then forwarded to the company. As marketing director, Mr. Hopkins does not receive copies of applications, cancellations, or other background documents from agents. Hopkins only receives copies of the summary transmittal sheets for each agent.
In November of 1987, Mr. Lowe solicited an application for disability insurance with an accidental death benefit rider from Tracy Bethay- Reed, who was employed by the Department of Health and Rehabilitative Services. She also wanted coverage for her husband, Roy Reed. Mr. Reed was not employed by the State of Florida, but by General Electric as a truckdriver, earning approximately $240.00 per week. Mr. Reed's salary had to be $35,000 per year to qualify for the insurance policy Mr. Lowe sold him. Mr. Lowe knew this from his training, see, Finding 4, above.
Mr. Lowe advised Mrs. Reed that her husband would be eligible for life insurance in the amount of $50,000. On November 20, 1987 Mr. Lowe submitted an application to colonial on behalf of Roy Reed, which represented that he was an employee with the State of Florida, Department of Health and Rehabilitative Services with a salary of $35,000 annually. It is not unusual for Colonial to insure a husband and wife who are employed by a single state agency. Mr. Lowe misrepresented Roy Reed's occupation, employer, and annual income on that application, and signed Mr. Reed's name to that application. If Mr. Lowe had disclosed Mr. Reed's true employer and earnings, Roy Reed would not have been eligible for State of Florida employee group accidental death insurance with Colonial. He might have qualified for an individual policy, had an application for such a policy been made.
On about May 1, 1988, Roy Reed was killed in an automobile accident. Colonial paid a death claim of $50,000 to Mrs. Bethay-Reed.
In March of 1988, Mr. Lowe solicited by telephone an application for disability insurance for Albert Pelham, who was married to Sandra Pelham, an employee of the State of Florida Department of Health and Rehabilitative Services. Mrs. Pelham told Mr. Lowe that her husband, Albert, was employed
as a construction worker by S.E.U. Construction, a private business. On about March 28, 1988 Mr. Lowe submitted and application to Colonial Life for disability insurance for Albert Pelham. On the application, Mr. Lowe fraudulently signed the name of Albert Pelham, and represented that Albert was a registered nurse. If Mr. Lowe had truthfully disclosed Albert Pelham's employment, the application submitted to Colonial would not have qualified Albert Pelham for disability income benefits.
Albert Pelham later became temporarily unable to work due to an injury and Colonial paid disability benefits to Mr. Pelham.
About July 15, 1988, Bill Hopkins of Colonial told Mr. Lowe his contract with Colonial was being terminated for cause, based on his misrepresentations on policy applications.
As a result of the claims filed by Mr. Reed and Mr. Pelham, it had dawned on officers at Colonial that Mr. Lowe had been such a successful agent because he had been writing insurance in an unauthorized manner,
i.e., he had routinely processed applications which indicated that both spouses were employees of the State of Florida when that was not the case, and obtained insurance on both, which was paid for by a payroll deduction from the spouse who was a state employee. Colonial instituted a civil suit against Mr. Lowe seeking damages, an injunction, and other remedies for breach of contract, in part to recover the funds paid by Colonial on the Reed and Pelham claims. That suit was settled; the terms of the settlement included a requirement that Mr.
Lowe make a cash payment to Colonial in the amount of $60,000 and not to compete with Colonial as an insurance agent. Mr. Lowe agreed to give Colonial a quarterly list of his accounts so that Colonial could determine whether or not Mr. Lowe had engaged in any violation of the noncompetition clause of the settlement agreement.
The $60,000 Mr. Lowe was to pay Colonial under the settlement was not paid in a lump sum. Rather, Mr. Lowe was required to pay $7,500 at the time the settlement was signed and $500 a month for several years, with a balloon payment at the end of that payment schedule. Mr. Lowe actually paid $8,000 at the time the settlement was signed and has made the monthly payments required under the settlement agreement.
Shortly after he was terminated as an agent of Colonial, on about July 20, 1988, Mr. Lowe submitted to Colonial a request to cancel a life insurance policy issued on the life Frederick Fowler. Mr. Fowler did not authorize this cancellation request. Mr. Fowler did not sign the cancellation request, or authorize anyone else to sign the request. Mr. Lowe fraudulently signed Mr. Fowler's name to the request.
On or about that same day, July 20, 1988, Mr. Lowe submitted a request to Colonial Life to cancel a life insurance policy on the life of Elijah Lewis. Mr. Lewis did not authorize this cancellation request. Mr. Lewis did not sign the cancellation request nor did he authorize anyone to sign such a request. Mr. Lowe fraudulently signed Mr. Lewis' name to the request.
On about August 3, 1987, Mr. Lowe had submitted an application to Colonial Life for health and accident insurance on Julio Proven of Miami, Florida. Mr. Proven was not an employee of the State of Florida, Department of Health and Rehabilitative Services although the insurance application represented that he was. Mr. Lowe filled in the fraudulent information, and
also signed Mr. Proven's name to that application although Mr. Proven neither signed an application nor gave anyone the authority to sign such an application for him.
Once again, on or about July 20, 1988, Mr. Lowe submitted a request to Colonial Life to cancel the insurance policy which had been issued to Mr. Proven. Mr. Proven did not authorize the cancellation request. Mr. Proven did not sign the request nor did he authorize anyone else to sign the request. Mr. Lowe fraudulently signed Mr. Proven's name to this request.
On or about August 4, 1987, Mr. Lowe had submitted an application to Colonial Life for health and accident insurance on Angel Fajardo of Miami, Florida. The application fraudulently represented Mr. Angel Fajardo was employed by the State of Florida Department of Health and Rehabilitative Services as an administrative assistant. Mr. Fajardo did not sign the application nor did he given anyone else the authority to sign the application. Mr. Lowe signed Mr. Fajardo's name to the application.
As with the other cancellations, on about July 20, 1988, Mr. Lowe submitted a request to Colonial to cancel the insurance policy issued to Angel Fajardo. Mr. Fajardo did not sign the cancellation request, nor did he authorize anyone else to sign the request. Mr. Lowe fraudulently signed Mr. Fajardo's name to this request.
Mr. Lowe contends that he was directed by his superiors at Colonial to cancel Mr. Fajardo's insurance policy or else Mr. Lowe would lose his job and face a law suit. Whether or not he was under any threats from Colonial to get business off the books which Mr. Lowe had obtained through false representations in insurance applications, he did not have the right to forge the names of insureds on applications for cancellation of those policies.
On or about August 3, 1987, Mr. Lowe had submitted an application to Colonial Life for health and accident insurance on Ernest Wilson of Miami, Florida. The application represented fraudulently that Mr. Wilson was employed by the State of Florida Department of Health and Rehabilitative Services. Mr. Wilson did not sign the application, nor did he give anyone else the authority to sign the application for him. Mr. Lowe fraudulently signed Mr. Wilson's name to that application.
On or about July 20, 1988, Mr. Lowe submitted a request to Colonial Life to cancel the insurance policy issued to Ernest Wilson. Mr. Wilson did not sign the cancellation request, nor did he authorize anyone else to sign the request. Mr. Lowe fraudulently signed Mr. Wilson's name to the cancellation request. Mr. Lowe's contention that he only admitted that he wrote Mr. Wilson's name on the cancellation form in the location calling for the insured's printed name but that he did not sign Mr. Wilson's name at the bottom of the form is rejected.
On about November 3, 1987, Mr. Lowe had submitted an application to Colonial for health and accident insurance on Felix Rodriguez. The application fraudulently represented that Mr. Rodriguez was an employee of the State of Florida Department of Health and Rehabilitative Services. Mr. Rodriguez did not sign the application, nor did he give anyone else the authority to sign it. Mr. Lowe fraudulently signed Mr. Rodriguez's name to that application.
On or about July 20, 1988, Mr. Lowe submitted a request to Colonial to cancel the insurance policy issued to Felix Rodriguez. Mr. Rodriguez did
not sign the cancellation request, nor did he authorize anyone else to sign the request. Mr. Lowe fraudulently signed Mr. Rodriguez's name to the cancellation request. Any threats made by employees of Colonial to take action against Mr. Lowe if the Rodriguez policy was not terminated fail to justify Mr. Lowe's forging the name of Mr. Rodriguez to a cancellation request.
On about November 10, 1987, Mr. Lowe had submitted an application to Colonial for health and accident insurance on Lourdes Mier of Hialeah, Florida. Despite what is contained on the application, Lourdes Mier was not employed as an investigator by the Florida Judicial Branch Number 11, i.e., she was not an employee of the Eleventh Judicial Circuit. Mrs. Mier did not sign the application, nor did she give anyone else the authority to sign it for her.
Mr. Lowe fraudulently signed Mrs. Mier's name to the application.
On July 20, 1988, Mr. Lowe submitted a request to Colonial to cancel the insurance policy issued to Mrs. Mier. Mrs. Mier did not sign the cancellation request, nor did she authorize anyone to sign it for her. Mr. Lowe fraudulently signed Ms. Mier's name to the cancellation request.
On July 20, 1988, Mr. Lowe submitted a request to Colonial to cancel the insurance policy issued to Alton Glass. Mr. Glass did not sign the cancellation request, nor did he authorize anyone to sign it for him. Mr. Lowe fraudulently signed Mr. Glass' name to the cancellation request.
On or about February 12, 1988, Mr. Lowe had submitted an application to Colonial for health and accident insurance on Valty Raymore of Miami, Florida. Mr. Raymore was not an R.N. employed by the State of Florida Department of Health and Rehabilitative Services as disclosed on the application. Mr. Raymore did not sign the application nor did he authorize anyone to sign it for him. Mr. Lowe fraudulently signed Mr. Raymore's name to that application.
On or about July 20, 1988, Mr. Lowe submitted a request to Colonial Life and Accident Insurance Company to cancel the life insurance policy issued to Mr. Raymore. Mr. Raymore did not sign the cancellation request nor did he authorize anyone to sign it for him. Mr. Lowe fraudulently signed Mr. Raymore's name to the cancellation request.
On or about July 20, 1988, Mr. Lowe submitted a request to Colonial to cancel an insurance policy issued to Willie Oliver. Mr. Oliver did not sign the cancellation request nor did he authorize anyone to sign it for him. Mr. Oliver did not authorize the cancellation. Mr. Lowe fraudulently signed Mr. Oliver's name to this request. He also forged the name of Jana C. Lowe as a witness to the request. Mr. Lowe's argument that he only admitted that he wrote Mr. Oliver's name on the cancellation request at the location calling for the insured's printed name, but that he did not sign it for Mr. Oliver, is rejected.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over this matter. Section 120.57(1), Florida Statutes. In an action to revoke a license to earn a livelihood, the licensing agency must prove misconduct by clear and convincing evidence. Ferris vs. Turlington, 510 So.2d 292 (Fla. 1987).
Relevant statutes.
The Department may revoke the license of an insurance agent if it finds that the licensee is guilty of:
Willful misrepresentation of any insurance policy or annuity contract or willful deception with regard to any such policy or contract, done either in person or by any form of dissemination of information or advertising. (Section 626.611(5), Florida Statutes)
Demonstrated lack of fitness or trustworthiness to engage in the business of insurance. (Section 626.611(7), Florida Statutes)
Fraudulent or dishonest practices in the conduct of business under the license or permit. (Section 626.611(9), Florida Statutes)
Willful failure to comply with, or willful violation of, any proper order or rule of the Department or willful violation of any provision of this code. (Section 626.611(13), Florida Statutes)
Admissibility of statements made at deposition in another case by Lowe. (Exhibit 2)
Mr. Lowe objected to the introduction into evidence of a portion of his deposition taken in the civil action filed by Colonial. He asserts that the introduction of the statements he made at his deposition would infringe his right to be free from self-incrimination under Article 1, Section 9 of the Florida Constitution and under the Fifth Amendment to the United States Constitution.
The implicit argument made by Lowe, that the Fifth Amendment privilege Mr. Lowe enjoys in administrative proceedings for license revocation is coextensive with the Fifth Amendment privilege he would enjoy as a criminal defendant, is flawed. See, McCormick on Evidence, Section 121 (Cleary ed. 1984) at 294- 95. In Arthurs v. Stern, 560 F.2d 477 (1st Cir. 1977), cert. denied
434 U.S. 1034 (1978), a federal appellate court considered the constitutionality of a Massachusetts statute 1/ which forbade granting a continuance to a doctor facing professional discipline while a related criminal prosecution was pending. That court found there was nothing "inherently repugnant to due process in requiring the doctor to choose between giving testimony at the disciplinary hearing, a course that may help the criminal prosecutors, and keeping silent, a course that may lead to the loss of his license." Id. at 478-79. Mr. Lowe made his choice to speak rather than to keep silent in the civil action filed by Colonial, and his admissions are admissible in evidence here. Those admissions condemn him. He acknowledged that he forged policyholder signatures on cancellation requests for policies owned by Julio Proven, Angel Fajardo, Ernest Wilson, Felix Rodriguez, Lourdes Mier, Alton Glass, Frederick Fowler, Elijah Lewis, Valty Raymore, and Willie Oliver. A finding of forgery could be based on an inference even without his testimony, however. It is incredible that so many persons insured under policies written by Mr. Lowe would all cancel their insurance on July 20, 1988, effective immediately, following closely upon
his termination as an agent for Colonial for failure to follow underwriting guidelines. Mr. Lowe had a motive to cancel the policies, viz., to minimize his financial exposure to claims for indemnification from Colonial if any of those insureds made claims under their policies.
Mr. Lowe rests his Fifth Amendment argument on cases cited in McCormick on Evidence, Section 132 (Cleary ed. 1984), which analyze Fifth Amendment rights in the context of criminal proceedings. They exemplify a general rule that a person's waiver of the privilege in one proceeding does not waive the privilege in another. For example, United States v. Miranti, 253 F.2d
135 (2d Cir. 1958) held that the defendant convicted for conspiracy, but not of any substantive crimes, could refuse to testify when called before a grand jury which was investigating the intimidation of witnesses during the trial of other conspirators, because his testimony could lead to his
prosecution on the substantive crimes. In Ottmano v. United Statutes, 468 F.2d
269 (1st Cir. 1972) Ottmano testified at his own trial and was convicted; when called as a witness at the trial of a co- conspirator he asserted his Fifth Amendment privilege. He could do so because an appeal of his conviction was pending, and if it were successful, he might be retired, and any testimony he gave at the trial of the co-conspirator would be admissable against him.
United States v. Wilcox, 450 F.2d 1131 (5th Cir. 1971), cert. denied, 405
U.S. 917 (1972) upheld a conviction obtained when the major government witness who testified against Wilcox in a prior criminal trial invoked his Fifth Amendment rights and refused to testify on Wilcox's retrial. The
witness was permitted to refuse to testify, and the government then was permitted to introduce a transcript of that witness' testimony from the first trial, including his cross-examination by the lawyer for Wilcox. But see, Ellis v. United States, 416 F.2d 791 (D.C. Cir. 1969) which held that a witness who testified voluntarily before a grand jury after being advised of his Fifth Amendment rights waived his Fifth Amendment privilege, and thereafter could not claim it when called to testify as a witness at the trial of a person indicted by the grand jury that heard his testimony, at least where the witness is not himself a defendant, or under indictment.
Cases analyzing whether a witness could be required to take the stand and testify at a criminal trial, or whether the witness' prior testimony could be used at a criminal trial when the witness declined to testify, have no application here. No attempt was made to require Mr. Lowe to testify in this proceeding.
There is no prohibition in the Rules of Civil Procedure against the use of a deposition taken in one proceeding as evidence in another proceeding. This is not true with all types of discovery, for under Rule 1.370(b), Fla.
R. Civ. P. "any admission made by a party under this rule is for the purpose of the pending action only and is not an admission by him for any other purpose nor may it be used against him in any other proceeding." Mr. Lowe offered no evidence about why he did not invoke his Fifth Amendment privilege in the collateral civil action filed by Colonial, when he was questioned about his fraudulent misrepresentations and forgeries. Florida case law permitted Mr. Lowe to assert his privilege there, DeLisi v. Smith, 423 So.2d 934 (Fla. 2d DCA 1982), rev. denied, 434 So.2d 887 (Fla. 1983). See also, Afro-Lecon, Inc. v. United States, 820 F.2d 1198 (Fed. Cir. 1987). Statements made at his deposition constituted admissions of a party opponent under Section 90.803 (18), Florida Statutes, which are admissible in this proceeding as an exception to the hearsay rule. Dinter v. Brewer, 420 So.2d 932 (Fla. 3rd DCA 1982). It is not important that the statements in his deposition were made under oath; had he made the same admissions to someone in casual conversation, that person would
be able to testify to those admissions at the license revocation hearing. Introduction of the transcript of the prior deposition serves the same purpose. Moreover, Mr. Manning, who testified in this disciplinary proceeding, attended that prior deposition and heard the admissions.
Exhibits 22, 23 and 24.
Mr. Lowe's admission that he signed the name of Alton Glass to Exhibit
22 and the names of Jana Lowe and Willie Oliver to Exhibit 24 makes those exhibits admissible. His admission that he signed the name of Valty Raymore to Exhibit 23 makes that exhibit admissible.
Summary.
Mr. Lowe has engaged in patterns of deceit by making false statements on applications for insurance, by forging the names of proposed insureds to insurance applications and by forging requests for cancellation of insurance. These dishonest practices demonstrate a lack trustworthiness to engage in the business of insurance. Because Mr. Lowe knew from his training that he was engaging in wrongdoing, his actions were willful violations.
the licenses and eligibility of Lawrence Sherman Lowe III, to hold licenses with respect to the business of insurance.
DONE and ENTERED this 31st day of July, 1990, at Tallahassee, Florida.
WILLIAM R. DORSEY, JR.
Filed with the Clerk of the Division of Administrative Hearings this 31st day of July, 1990.
1/ Mass. Gen. Laws Ann., Ch. 112, Section 63 (West 1983).
APPENDIX TO RECOMMENDED ORDER DOAH CASE NO. 89-2730
21 and 22. Rejected because the application Mr. Pelham filled out is not the application submitted to Colonial. The one Colonial received does not bear the signature of the real Mr. Pelham. See, Exhibit 25, pages 21 and 22.
14.
14.
14.
The findings proposed by the Department have for the most part been adopted.
Robert v. Elias, Esquire Office of Legal Services Department of Insurance and
Steven M. Malono, Esquire
Edward W. Dougherty, Jr., Esquire Mang, Rett & Collette, P.A.
